Finbond, an SA mutual bank owned by depositors, has seen its bad debt increase from 16.5% of all revenue to 26.7%, in its half-year to end-August.

Finbond also offers credit in 13 states in North America and in the city of Ontario, Canada, where its impairments are much lower than in SA.

Bad debt equalled 9% of all US revenue, which the bank said revealed the strength of the US economy and “significant government subsidies and stimulus, allowing our customers to settle their loans”. 

The specialist lending company has made provision for 31% of SA loans to remain unpaid due to “additional consumer stress” because of the lockdown and job losses.

Finbond which focuses on short-term loans, is not alone in expecting rising bad debt.

Capitec had a 78% drop in headline profit in its six months to August, as it put aside more than in R4.2m provisions for future bad debt.

Standard Bank’s commercial and investment loans that needed restructuring increased from R48bn at the end of June to R70bn in September, showing that businesses were also finding it difficult to meet debt obligations.

Finbond, which plays in the unsecured lending credit landscape in SA and North America, also reduced the loans issued in SA, dropping them 32% to R523.2m in the six months to August as it used stricter lending criteria in the face of a weakening economy.

It also reduced loans in the US 29% as a result of the lockdown, it said.

Because of fewer loans issued in SA and the US, Finbond's half-year earnings before interest, tax, depreciation and amortisation decreased 66% to R116.8m from R340.5m the year before.

In SA, customers using Finbond for everyday transactional banking increased 13% from 250,414 to 283,615.

It said it still wanted to convert its mutual bank into a retail bank, but that that was taking longer than expected and was expensive to implement.


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